Employment Law Requirements by Employee Count for Small Businesses

Some small business owners assume that employment law only applies to larger corporations. The truth is, even a company with just one employee has legal obligations. The bigger your business grows, the more regulations come into play—and the more critical it becomes to establish clear policies, adopt a current employee handbook, and ensure compliance with applicable laws & regulations

So, at what point should a business start thinking about employment law?

Legal Responsibilities by Business Size

Here’s a breakdown of when specific employment laws start to apply:

1+ Employees

Even if you have just one employee, you must comply with:

• Fair Labor Standards Act (FLSA) – Minimum wage, overtime, and recordkeeping rules.
• Occupational Safety and Health Act (OSHA) – Workplace safety standards.
• State and Local Laws – Some states have stricter employee protections, such as paid sick leave.

15+ Employees

Now, your business must also comply with:

• Title VII of the Civil Rights Act – Protects employees from discrimination based on race, color, religion, sex, or national origin.
• Americans with Disabilities Act (ADA) – Requires reasonable accommodations for employees with disabilities.

20+ Employees

• Age Discrimination in Employment Act (ADEA) – Protects workers over 40 from age-based discrimination.

50+ Employees

• Family and Medical Leave Act (FMLA) – Requires employers to provide unpaid, job-protected leave for qualified medical and family reasons.
• Affordable Care Act (ACA) Requirements – Additional healthcare mandates apply.

100+ Employees

• EEO-1 Reporting – Businesses with 100 or more employees are required to report workforce demographics to the Equal Employment Opportunity Commission (EEOC).

Why Every Business (Big or Small) Needs an Employee Handbook

Even if your business is still small, an employee handbook is a valuable tool for:

• Setting clear expectations and consistently applied company policies.
• Preventing misunderstandings and disputes.
• Demonstrating compliance with labor & employment laws.
• Protecting your business from legal claims and mitigating financial exposure.

Key policies to include:

• Wage and hour policies (overtime, PTO, remote work rules).
• Anti-discrimination and harassment policies.
• Workplace safety guidelines.
• Disciplinary procedures and termination policies.

When Should a Business Consult with an Employment Attorney?

Many business owners wait until they have a legal issue before seeking legal advice—but being proactive saves money, prevents avoidable claims, and helps defend any lawsuits filed. Conferring with an attorney upfront costs a small fraction of the expense required when reacting to an employment issue, provides peace of mind, and provides the necessary records to successfully defend any claims that arise.

You should consult an attorney when:

• You hire your first employee – To ensure contracts and policies comply with state and federal laws.
• Your business reaches 10-15 employees – To establish an employee handbook and formal HR policies.
• You start hiring independent contractors – To avoid costly misclassification penalties.
• You receive a complaint or legal challenge – Such as an EEOC complaint or wage dispute.

The Cost of Ignoring Employment Law

Failing to comply with employment regulations can lead to:

• Costly lawsuits and settlements.
• Government fines and penalties.
• Reputation damage that affects hiring and customer trust.

For example, businesses that misclassify employees as independent contractors face IRS penalties, back wages, and expensive lawsuits.

Final Thoughts: Don’t Wait Until It’s Too Late

Understanding employment law requirements by employee count for small businesses isn’t optional—it’s essential. Whether you’re hiring your first employee or surpassing the 100-person mark, proactive compliance, a well-crafted handbook, and timely legal counsel safeguard your bottom line and reputation. The earlier you put the right policies in place, the better protected your business will be.

By taking proactive steps—like adopting an employee handbook and consulting with an employment attorney—you can prevent costly legal issues down the road.